Business update: Starbucks contribution to scholarship overstated

It turns out Starbucks isn't contributing any upfront scholarship money to an online college degree program it introduced this week.

The Associated Press

NEW YORK — It turns out Starbucks isn't contributing any upfront scholarship money to an online college degree program it introduced this week.

The Seattle-based company unveiled a program Monday that included a scholarship it described as "an investment" between Starbucks and Arizona State University. The program is designed to allow Starbucks workers to earn an online degree at the school at a steeply discounted rate.

Initially, Starbucks said that workers would be able to offset the costs through an upfront scholarship it was providing with Arizona State, but declined to say exactly how much of the cost it was shouldering. The chain estimated the scholarship would average about $6,500 over two years to cover tuition of about $20,000.

Following the announcement, however, Arizona State University President Michael Crow told The Chronicle of Higher Education that Starbucks is not contributing any money toward the scholarship. Instead, Arizona State will essentially charge workers less than the sticker price for online tuition. Much of the remainder would likely be covered by federal aid since most Starbucks workers don't earn a lot of money.

Workers would pay whatever costs remained out of pocket for the first two years, and Starbucks would bear no costs.

Starbucks Corp. had previously declined to say how much it was contributing to the scholarship. But in a subsequent email Wednesday evening, Starbucks said that the scholarship is being "funded by ASU."

A representative for Arizona State wasn't immediately available for comment.

The program, which has been widely praised because education benefits are rare for low-wage workers, brought attention to the struggles people face in paying for college. It is unusual because workers can pick from 40 different degree programs and aren't required to stay with Starbucks after they complete their degrees.

As with most matters involving financial aid, the details of the program are complicated and would vary depending on a worker's situation. For the freshman and sophomore years, workers would pay any remaining costs after factoring in the discount from ASU and federal aid.

Based on estimates provided by Starbucks, the worker would pay around $1,000 a year on average out of pocket.

The program would work much the same way for the junior and senior years, except that Starbucks would reimburse workers for their out-of-pocket costs, once they completed 21 credits.

It's not clear whether the program will end up costing Starbucks more than its existing program, which offers up to $1,000 a year to take classes at City University of Seattle or Strayer University, with no limit on the number of years they can apply. Since it was rolled out in October 2011, Starbucks said it has paid out $6.5 million for that program. It will be phased out by 2015.

The company said it does not yet know how much the new program might cost. But Laurel Harper, a Starbucks spokeswoman, said its analysis with ASU found most of its workers would qualify for federal Pell grants.

Mark Kantrowitz, publisher of EdVisors.com, a website about paying for college, said the program could benefit all parties involved.

Workers could get a chance at a degree from Arizona State University at a reduced rate. Arizona State could get a revenue boost from federal aid and out-of-pocket costs workers and Starbucks later pays. And Starbucks could attract a better pool of workers and burnish its corporate image.

Starbucks said its workers are "embracing this benefit with overwhelming excitement; ASU has seen an enormous uptick in interest."